DAVOS, Switzerland (USA TODAY) -- The secret Swiss bank account is no longer what is used to be.
years the accounts were the basis of plots both real and imagined in
which people hid cash to avoid the taxman or the police if the gains
were from crime.
But prior to a midnight New Year's Eve deadline,
many of the Swiss banks agreed to divulge to the U.S. government which
Americans have accounts here to avoid prosecution on charges of helping
them evade taxes.
As many as 40 of Switzerland's approximately 300
banks are reported to have said publicly that they would voluntarily
hand over closely guarded client information to the Department of
Justice in return for prosecutorial immunity.
After decades of
facilitating, even if not explicitly engineering, the shielding of
undeclared assets from foreign tax authorities, a Swiss banking industry
built on a legacy of absolute secrecy on behalf of customers may start
singing like a canary.
"What's really clear is that this (Justice)
program is at the limit of what is tolerable for banks in Switzerland,"
says Sindy Schmiegel, of the Swiss Bankers Association, in Basel.
is very costly, and banks that join the plan may still face huge
fines," she says. "It's important to remember that banking secrecy in
Switzerland was not introduced for tax reasons."
Any adult can
open a bank account in Switzerland no matter their citizenship. The
banks would normally refuse entreaties from foreign governments looking
to see if citizens hiding cash were among the account-holders identified
That prompted accusations that the Swiss were aiding
and abetting crime. But the Swiss Bankers Association insists that
anonymity does not absolve account-holders from their obligation to
respect what the Swiss Bankers Association refers to as "the legal
provisions of the home country with regard to cross-border business."
for the secrecy aspect of the accounts, it's true that under Swiss law
banks are not permitted to disclose financial information to third
parties. But the banks are required to be aware of the identity of
account-holders. And there are numerous provisions under Swiss civil and
criminal law that permit banking secrecy to be lifted.
Church, a professor of Swiss politics at the University of Kent in
Britain, says that the tradition for financial discretion in Switzerland
can be traced back fairly precisely to 1934, when it was forged into
law as a consequence of French and German agitation.
hear that it was introduced to preserve Jewish money from the Nazis,"
says Church. "That probably happened at first, but it actually came
about because the Third Republic and Weimar governments were extremely
worried about large leakages of money to Switzerland because both of
them were, for all sorts of reasons, politically unstable."
response, Church says that Switzerland with its stable society and
well-developed banking sector decided to make it a criminal offense to
breach a stringent financial confidentiality law. The Swiss then ended
up adopting the concept of concealment as a cornerstone of the nation's
"But that's changing now. The industry has
realized that you can't just sell yourself on the basis of secrecy. You
have to have other services, as well," says Church.
The crack in
secrecy laws began in earnest following the first financial crisis when
in 2009 the Swiss withdrew objections to a widely accepted Organization
for Economic Co-operation and Development tax reporting convention.
convention resulted in Swiss banks being permitted to supply some
information to foreign tax authorities but only for specific and
substantiated reasons. In other words, if there is a solid basis to
suspect foul play, the banks would review requests for information on a
possible account-holder on a case-by-case basis.
In 2009, UBS,
Switzerland's largest bank, agreed to pay a $780 million fine related to
allegations of concealing identities and assets from the IRS.
the loss of inviolate secrecy will hurt Swiss banking, which accounts
for 10% of Swiss gross national product, remains to be seen.
The Wall Street Journal
reported in December that many Swiss banks are pressuring U.S.
account-holders to make sure they are not hiding anything so as not to
affect their amnesty deal with the U.S. Justice Department. In some
instances banks have frozen accounts unless the customer can prove
what's inside has been declared to the IRS.
"Some people believed
that if they closed or moved an account, they wouldn't be found, but
that's not the case," William Sharp of law firm Sharp Partners told the Journal. "Now IRS detection of an account is simply a matter of when."
a recent report by EY, a financial services firm, around two-thirds of
Swiss banks surveyed were said to be experiencing "major misgivings"
over the attempt to end the tax dispute. A majority expected any future
settlements to have a negative effect on its banking industry.
Swiss, meanwhile, are pushing back and have launched a probe into a
former UBS banker for revealing information in violation of Swiss law
about U.S. clients, according to the Office of the Attorney General of
Switzerland, which confirmed the case to USA TODAY.
marks the start of the World Economic Forum at the Swiss mountain resort
of Davos, where more than a few of the world's richest people in
attendance may have a Swiss account or two. The forum has scheduled a
discussion about how, with traditional banking secrecy gone, Switzerland
can reinvent itself.
FULL COVERAGE: World Economic Forum 2014 in Davos
bankers accept that they are living in a new reality," says Bruno
Patusi, head of wealth and asset management at EY, based in Zurich.
we will only see a change in certain areas. Confidentiality is still
extremely important. It is true that we are seeing assets flow out (of
Switzerland), but that's partly because the next generation is more
interested in spending than saving."
Meanwhile, the Swiss bank
account so long associated in the public imagination as a place to
deposit large amounts of money with little expectation of discovery may
be on its way out. The bank account used so often by master criminals,
spies and sheiks in film and international thriller novels may live on
only in fiction.
The comedian Woody Allen once joked: "If only God
would give me some clear sign! Like making a large deposit in my name
in a Swiss bank." He may want to look elsewhere for a message from